U.S. mortgage rates decline

Anticipation of lower inflation sends rates lower: economist

CHICAGO (MarketWatch) -- The average interest rate for 30-year fixed-rate mortgages fell to its lowest level since January, according to Freddie Mac's weekly survey released on Wednesday.

The 30-year mortgage averaged 6.18% for the week ended Nov. 22, down from 6.24% last week. A year ago, the mortgage averaged 6.28%.

This week marks the mortgage benchmark's lowest average rate since Jan. 26, when it averaged 6.12%.

Other mortgages also saw a drop in rates over the week, influenced by anticipation over a lessening of inflationary pressures, said Freddie Mac's chief economist.

"Housing starts in October were down more than expected, which the market saw as an indication housing would be a bigger drag on the economy than had previously been thought," said Frank Nothaft, Freddie Mac vice president and chief economist, in a news release.

"Slower growth usually means less inflation and less inflation means lower interest rates. Hence, the drop in mortgage rates this week," he said.

The 15-year fixed-rate mortgage averaged 5.91% for the latest week, down from its average of 5.94% last week and the lowest since March 2, when it averaged 5.89%. The rate on a 15-year, a popular refinancing vehicle, averaged 5.81% a year ago.

Five-year Treasury-indexed hybrid adjustable-rate mortgages averaged 5.99% for the week, down from 6.04% a week ago and the weakest since March 16, when it averaged 5.93%. The ARM averaged 5.75% a year ago.

One-year Treasury-indexed ARMs averaged 5.49% for the week, down from 5.53% last week. The ARM averaged 5.14% a year ago.

The 30- and 15-year fixed-rate mortgages required an average 0.5 point to obtain the interest rate, while the 5- and 1-year ARMs required 0.6 point on average. A point equates to 1% of the loan, charged as pre-paid interest.

A separate survey released Wednesday by the Mortgage Bankers Association found that the volume of mortgage applications decreased during the week ended Nov. 17, despite the declining rates.

Application activity decreased a seasonally adjusted 3.7%, according to the MBA survey, which covers about half of all U.S. retail residential mortgage originations. See full story.

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